A gym membership for gym rats
Marginal Revolution posts this item from a reader:
A Danish chain of gyms is now offering membership free of charge, with the only caveat that you have to show up, in order for the membership to be free. If you fail to show up once per week you will be billed the normal monthly membership fee for that month. This should solve the problem with incentives that gym membership normally carries – there is suddenly a very large (membership is around 85$ per month) incentive to show up each week.
And yet, clearly it must not solve the problem with incentives that gym membership normally carries, otherwise the gym, which is after all, still a business, wouldn’t offer it to customers. This model is the same as the standard model in which lazy members who skip out on the StairMaster subsidize those who work out regularly. The only difference here is the subsidy is potentially much larger.
Side note: Only showing up once a week doesn’t seem like a bar that would be too high to meet.
One reader says:
This is just turning the incentive around, not creating a new one. After all, normally people pay for their membership up front, and then many still choose not to go. The incentive works the same here: their laziness is worth 85 bucks to them, whether already paid up front and lost (well not technically lost, but not made use of by not showing up) or by having to pay after the fact (by not showing up). Either way it does not matter to a lazy person, they will still rather stay at home and gladly pay the associated fine.
Another possible way to think about this incentive is as a not-quite-sunk cost. Economists like to tell people that Econs avoid sunk costs, and then point out the strange irregularity of Homers who choose to stay for a movie they know they won’t like after watching the opening credits. Gyms, for lots of reasons, make it easy for people to follow the lessons of standard economics. But this gym membership fee is not gone for good. In that respect, it is much closer to a security deposit for renting an apartment. You get your money back if you take good care of…you. And since it is likely that frequent gym attendees also spend money on other gym goods (health shakes, personal trainers, workout classes), the lure of a free membership may, like a security deposit, be a way for the gym to sort good customers from bad ones.